How to Use Your 529 Funds to Study Abroad
Many students turn to international study to enrich their academic experience and expand their cultural horizons. More than 280,000 U.S. college students participated in study abroad programs in the 2022–2023 school year,1 while more than 92,000 Americans pursued higher education degrees from international institutions2 in 2024.
"It may come as a surprise that you can use a 529 plan to pay for studies overseas, but there are also limitations, so understanding the rules is crucial," says Chris Kawashima, CFP®, director of financial planning and wealth management research at the Schwab Center for Financial Research.
Notably, withdrawals from a 529 plan for qualified education expenses—including tuition, fees, books, supplies, and some room and board—can be made tax-free. However, nonqualified distributions may be subject to ordinary income tax on earnings and a 10% penalty.
Here are some key guidelines to help ensure you're able to realize the tax advantages of your 529 plan when paying for education outside the U.S.
- Whether it's a semester abroad sponsored by a U.S. college or a degree program at an international university, the institution must be eligible for Title IV federal student aid, which you can check by looking up the federal school code at fsapartners.ed.gov. You can also confirm eligibility directly with the school.
- Study abroad programs must be eligible for academic credit at the sponsoring institution.
- As with studying in the U.S., students must be enrolled at least half-time to use 529 plan funds for room and board. If the student opts to live off campus, eligible room and board can't exceed the institution's published cost of attendance (COA) estimate for those expenses.
- Generally speaking, costs related to traveling abroad, including airfare, international health insurance, and international cellphone plans, aren't reimbursable by 529 plans.
The One Big Beautiful Bill Act permits people to use 529 funds in the U.S. for certain nondegree and credentialing programs; however, it's unclear how—or if—that will apply to international study. You should also look into how the exchange rate could affect the cost of both qualified and nonqualified expenses. And be sure to reimburse yourself for qualified expenses during the same year you pay for them out of pocket, assuming you don't pay directly from your 529 plan.
"If you plan carefully and follow the rules, 529s can be a great way to help fund what can be a life-changing academic experience," Chris says.
1"U.S. Students Studying Abroad, 1989/90–2022/23," opendoorsdata.org, 2024.
2"U.S. Students Pursuing Full Degrees," iie.org, 11/2024.
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Qualified education expenses can include tuition, fees, books, supplies, equipment, and room and board. Certain costs associated with K-12 tuition and other expenses (ex. tutoring), participation in a registered apprenticeship program, postsecondary credentialing expenses if the beneficiary is enrolled in a recognized postsecondary credential program, or payment of a qualified education loan up to $10,000 may also be considered qualified educational expenses. The availability of tax or other benefits may be conditioned on meeting certain requirements, such as residency, purpose for or timing of distribution, or other factors. Clients should consult a qualified tax advisor to discuss their individual situation.
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The earnings portion of a nonqualified withdrawal is subject to federal and state income tax and a 10% penalty. State tax treatment may vary. Check with your tax advisor for rules on your state tax treatment.
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